PART X – CREDIT TRANSACTIONS
have been reasonably ascertained). The
LOAN (1993, 1996, 1998, 2001, 2004, 2005,
2016 BAR)
Q: With regard to an award of interest in
the concept of actual and compensatory
damages, please state the guidelines
regarding the manner of computing legal
interest in the following situations:
1. When the obligation is breached and it
consists in the payment of a sum of money
like a loan or forbearance of money;
2. When the obligation does not constitute
a loan or forbearance of money.
Consider the issuance of BSP-MB Circular
No. 799, which became effective on July 1,
2013. (2016 BAR)
A:
1. When the obligation is breached and it
consists in the payment of sum of money like
a loan or forbearance of money, in the
absence of stipulation, the rate of interest
shall be the legal rate of 6% per annum, (Art.
2209, CC) which was increased to 12% per CB
Circular No. 905, series of 1982 to be
computed from default. The twelve percent
(12%) per annum legal interest shall apply
only until June 30, 2013. From July 1, 2013,
the new rate of six percent (6%) per annum
shall be the prevailing rate of interest when
applicable. (Nacar v. Gallery Frames, 703
SCRA 439 [2013], applying BSP-MB Circular
No. 799)
2. The interest on the amount of damages
awarded may be imposed at the discretion of
the court at the rate of 6% per annum. No
interest, however, shall be adjudged on
unliquidated claims or damages, exept when
or until the demand can be established with
reasonable certainty. Accordingly, where the
demand is established with reasonable
certainty, the interest shall begin to run from
the time the claim is made judicially or extra-
judicially, but when such certainty cannot be
so reasonably established at the time the
demand is made, the interest shall begin to
run only from the date the judgment of the
court is made (at which time the
quantification of damages may be deemed to
actual base for the computation of legal
interest shall, in any case, be on the amount
finally adjudged. (Nacar v. Gallery Frames,
703 SCRA 439 [2013])
Q: A, upon request, loaned his passenger
jeepney to B to enable B to bring his sick
wife from Paniqui, Tarlac to the Philippine
General Hospital in Manila for treatment.
On the way back to Paniqui, after leaving
his wife at the hospital, people stopped the
passenger jeepney. B stopped for them
and allowed them to ride on board,
accepting payment from them just as in
the case of ordinary passenger jeepneys
plying their route. As B was crossing
Bamban, there was an onrush of lahar
from Mt. Pinatubo. The jeep that was
loaned to him was wrecked.
1) What do you call the contract that was
entered into by A and B with respect to the
passenger jeepney that was loaned by A to
B to transport the latter’s sick wife to
Manila?
2) Is B obliged to pay A for the use of the
passenger jeepney?
3) Is B liable to A for the loss of the
jeepney? (1993 BAR)
A:
1) The contract is called “commodatum”. (Art.
1933, Civil Code)
2) No, B is not obliged to pay A for the use of
the passenger jeepney because commodatum
is essentially gratuitous. (Art. 1933, Civil
Code)
3) Yes, because B devoted the thing to a
purpose different from that for which it has
been loaned (Art. 1942, par. 2 Civil Code)
Q: Distinguish briefly but clearly between
Mutuum and commodatum. (2004 BAR)
A: In mutuum, the object borrowed must be a
consumable thing the ownership of which is
transferred to the borrower who incurs the
obligation to return the same consumable to
the lender in an equal amount, and of the
same kind and quality. In commodatum, the
object borrowed is usually a non-consumable
thing the ownership of which is not
transferred to the borrower who incurs the
obligation to return the very thing to the
lender.
Q: Before he left for Riyadh to work as a
mechanic, Pedro left his Adventure van
with Tito, with the understanding that the
latter could use it for one year for his
personal or family use while Pedro works
in Riyadh. He did not tell Tito that the
brakes of the van were faulty. Tito had the
van tuned up and the brakes repaired. He
spent a total amount of P15, 000.00. After
using the vehicle for two weeks, Tito
discovered that it consumed too much
fuel. To make up for the expenses, he
leased it to Annabelle. Two months later,
Pedro returned to the Philippines and
asked Tito to return the van.
Unfortunately, while being driven by Tito,
the van was accidentally damaged by a
cargo truck without his fault.
a) Who shall bear the P15, 000.00 spent
for the repair of the van? Explain.
b) Who shall bear the costs for the van's
fuel, oil and other materials while it was
with Tito? Explain.
c) Does Pedro have the right to retrieve
the van even before the lapse of one year?
Explain.
d) Who shall bear the expenses for the
accidental damage caused by the cargo
truck, granting that the truck driver and
truck owner are insolvent? Explain. (2005
BAR)
A:
a) The contract between Pedro and Tito is
one of commadatum. Of the P15, 000.00
spent, Pedro, the bailor, shall bear the
expenses for the repair of the faulty
brakes, they being extraordinary expenses
incurred due to the non-disclosure by the
bailor of the defect or fault; Tito, on the
other hand, shall shoulder that part of the
P15, 000.00 spent for the tune-up, said
expense being ordinary for the use and
preservation of the van.
b) The costs for the fuel and other materials
are considered ordinary expenses, and
consequently Tito, the bailee, shall shoulder
them. (Art. 1941, Civil Code)
c) No, Pedro cannot demand the return of
the van until after the expiration of the
one-year period stipulated. However, if in
the meantime he should have urgent need of
the van, he may demand its return or
temporary use.
d) Both Tito and Pedro shall bear equally
the costs of the extraordinary expenses,
having been incurred on the occasion of
actual use of the van by Tito, the bailee,
even though he acted without fault.
Q: Distinguish usufruct from
commodatum. (1998 BAR)
A: Usufruct is a right given to a person
(usufructuary) to enjoy the property of
another with the obligation of preserving its
form and substance. (Art. 562, Civil Code)
On the other hand, commodatum is a contract
by which one of the parties (bailor) delivers
to another (bailee) something not
consumable so that the latter may use it for
a certain time and return it. In usufruct the
usufructuary gets the right to the use and to
the fruits of the same, while in commodatum,
the bailee only acquires the use of the thing
loaned but not its fruits. Usufruct may be
constituted on the whole or a part of the
fruits of the thing. (Art. 564, Civil Code) It
may even be constituted over consumables
like money (Alunan v. Veloso, 52 Phil. 545).
On the other hand, in commodatum,
consumable goods may be subject thereof
only when the purpose of the contract is not
the consumption of the object, as when it is
merely for exhibition. (Art. 1936, Civil Code)
Q: In the province, a farmer couple
borrowed money from the local merchant.
To guarantee payment, they left the
Torrens Title of their land with the
merchant, for him to hold until they pay
the loan. Is there a –
a) contract of pledge
b) contract of mortgage
c) contract of antichresis, or
d) none of the above? Explain. (1996 BAR)
A: None of the above. There is no pledge
because only movable property may be
pledged (Art. 2094). If at all, there was a
pledge of the paper or document constituting
the Torrens Title, as a movable by itself, but
not of the land which the title represents.
There is no mortgage because no deed or
contract was executed in the manner
required by law for a mortgage (Arts. 2085
to 2092; Arts. 2124 to 2131). There is no
contract of antichresis because no right to
the fruits of the property was given to the
creditor (Art. 2132). A contract of simple
loan was entered into with security
arrangement agreed upon by the parties
which is not one of those mentioned above.
Q: The parties in a contract of loan of
money agreed that the yearly interest rate
is 12% and it can be increased if there is a
law that would authorize the increase of
interest rates. Suppose OB, the lender,
would increase by 5% the rate of interest
to be paid by TY, the borrower, without a
law authorizing such increase, would OB’s
action be just and valid? Why? Has TY have
a remedy against the imposition of the
rate increase? Explain. (2001, 2004 BAR)
A: OB's action is not just and valid. The debtor
cannot be required to pay the increase in
interest there being no law authorizing it, as
stipulated in the contract of loan. Increasing
the rate in the absence of such law violates
the principle of mutuality of contracts
under Art. 1308.
DEPOSIT (1997, 1998 BAR)
Q: In order to secure a bank loan, XYZ
Corporation surrendered its deposit
certificate, with a maturity date of 01
September 1997 to the bank. The
corporation defaulted on the due
repayment of the loan, prompting the
bank to encash the deposit certificate. XYZ
Corporation questioned the above action
taken by the bank as being a case of
pactum commissorium. The bank
disagrees. What is your opinion? (1997
BAR)
A: There is no pactum commissorium here.
Deposits of money in banks and similar
institutions are governed by the provisions on
simple loans (Art. 1980). The relationship
between the depositor and a bank is one of
creditor and debtor. Basically this is a matter
of compensation as all the elements of
compensation are present in this case (BPI v.
CA, G.R. No. 104612, May 10, 1994).
Q: X, who has a savings deposit with Y
Bank in the sum of P1, 000, 000.00 incurs
a loan obligation with the said Bank in the
sum of P800 000.00 which has become
due. When X tries to withdraw his deposit,
Y Bank allows only P200, 000.00 to be
withdrawn, less service charges, claiming
that compensation has extinguished its
obligation under the savings account to
the concurrent amount of X’s debt. X
contends that compensation is improper
when one of the debts, as here, arises from
a contract of deposit. Assuming that the
promissory note signed by X to evidence
the loan does not provide for
compensation between said loan and his
savings deposit, who is correct? (1998
BAR)
A: Y Bank is correct. Art. 1287, Civil Code,
does not apply. All the requisites of Art. 1279,
Civil Code are present. In the case of Gullas v.
PNB (62 Phil. 519), The Supreme Court held:
“The Civil Code contains provisions regarding
compensation (set off) and deposit. These
portions of Philippine Law provide that
compensation shall take place when two
persons are reciprocally creditor and
debtor of each other. In this connection, it
has been hesld that the relation existing
between a depositor and a bank is that of
creditor and debtor. xxx As a general rule, a
bank has a right of set off of the deposits in its
hands for the payment of any indebtedness to
it on the part of a depositor.” Hence,
compensation took place between the mutual
obligations of X and Y Bank.